Corrupt government agencies don't just accidentally hire bad auditors—they strategically pick the ones with the worst reputations to help hide their crimes.
SSRN · March 17, 2026 · 6390478
The Takeaway
In countries with high corruption, officials deliberately contract with audit firms known for 'deficient' audits. This isn't a mistake or a cost-saving measure; it is an intentional choice to ensure that the misuse of public funds is never professionally detected or disclosed.
From the abstract
We examine government agencies’ audit firm selections when procuring financial audit services. Using a sample of 2,760 financial audit contracts across 17 European countries and a staggered difference-in-differences design, we find that government agencies are more likely to contract with audit firms that receive PCAOB inspection reports with more deficient audits. This tendency is more pronounced in countries with greater illegal diversion of public funds and weaker accountability mechanisms, b